North Korea: Luxury Goods and Squandered Money?

Five hundred tons of flour for flood victims rolled into North Korea this week. Last month, despite a poor harvest and severe flooding, North Korea rejected an offer of flour, instant noodles and medicine from their southern neighbours. This week it was also revealed that there has been a sharp increase in the import of luxury goods.

A lawmaker in the current ruling party of South Korea, Yoon Sang-Hyun, revealed that North Korea's imports of luxury goods amounted to $584.8million last year. This is a clear jump from previous year's statistics, as the total for 2009 was $322.5million and in 2010 it was $446.2million. The report claims that the bulk of the items were high-end cars, TVs, computers, liquor and watches. Kim Jong-Un took control of the DPRK last December and was educated in Europe where he may have picked up a few of his tastes for luxury items. It is rumoured that he has quite penchant for expensive items and his wife was recently spotted carrying a Dior handbag valued at over $1,500. Artworks & antique imports have also increased 10 times from figures in 2009. Other items such as perfumes, fur and cosmetics are on the rise also.

While this may just appear like a lavish expenditure for a new leader, the figures reveal a saddening truth. While the political elites may enjoy their new cars and watches, those who live outside the elites continue their battle to survive. Those who are a cog in the bureaucracy or are key decision makers enjoy a far higher standard of living than the rest of the population. Those outside of the inner circle can earn an official salary of $2 or $3 dollars a month. Even if they had the access to buy the same Dior handbag, that Kim Jong-Un's wife was sporting, and could save their total earnings each and every month it would take them over 40 years of saving to be able to buy the pretty little black handbag. Of course that would never be their priority so what could North Korea have bought with $584.8million?

Yoon Sang-Hyun stated : "The value of North Korea's luxury goods imports last year was enough to buy 1.96 million tons of wheat. Kim Jong Un is neglecting his starving people". It is safe to say that the money could have been better spent elsewhere. Infrastructure, food resources, hospitals, education would all be fine projects to fund. Thus why increase luxury imports? Is the increase only due to reckless desire?

Kim Jong-Un is probably consolidating his own hold on power through gifts. In exchange for support, it is likely that many of these luxury goods are being handed out to keep the young leader in favour. It was widely believed that after his father's death, his son would have to convince the ruling elites to continue to trust in him and the regime and by handing out trinkets, it may lure in extra support. With that being said, the DPRK leader is reported to be a lover of Western items and his own personal desires should not be ignored. His upbringing will have afforded him certain tastes and it's unlikely he will put himself under some self-hardship for the good of his nation, even if publicly he makes great pains to show he is one of the people.

There is an alternate theory also that may explain partially why we can see an increase in luxury goods. Kim Jong-Un to his credit appears to be slowly making some moves in reforming his nation. With the assistance of China he announced free economic zones near the Chinese-DPRK border and recently appears to be making moves in replacing some of the old guard. A new agricultural minister was announced who may trigger some reforms in much needed areas. With these movements occurring there has been space for an emerging entrepreneurial class to develop. While the official wage remains painfully low, there is a new set of people selling private goods on the North Korean market and earning big money, selling anything from cigarettes to DVD players.

Reportedly there are in excess of 240,000 people earning hundreds of dollars extra through selling private items. With more people having a disposable income comes the desire for luxury items. While it may still be in its infancy, the growing entrepreneurial class may in the future cause further shifts in policy as they wield their income. If Kim Jong-Un reforms in the manner China once did and begins to accommodate this emerging class of people, then the DPRK could see real change. For the time being, foreign reporters or lawmakers in neighbouring countries will deem the rise of luxury imports solely as squandered money and a wasted opportunity for change.